The US has expressed concerns over the incident and deteriorating relations between India and Canada on the issue, US media reports said.
Canadian Prime Minister
In fact, both countries expelled one diplomat each from their high commissions.
Nijjar is described by Indian officials as a Sikh separatist leader in Canada touting pro-Khalistan slogans and demanding separation from India in a disturbing secessionist movement.
India was deeply upset recently when pro-Khalistani elements took out a tableau through the streets of Canada glorifying the assassination of the then-Indian Prime Minister Indira Gandhi by her Sikh bodyguards in 1984.
She was assassinated for her operation "Blue Star" sending the army into the Golden Temple in Amritsar to flush out terrorists which a section of the Sikhs community viewed as a sacrilege on their holy shrine.
Prime Minister
Tensions escalated between Canada and India as Ottawa alleged that New Delhi may have been behind the killing of a Sikh activist on Canadian soil, with both sides expelling senior diplomats even as India rejected the allegation as "absurd".
Trudeau said on Monday that his government was investigating "credible allegations" that Indian government agents had been involved in the death of Hardeep Singh Nijjar.
Nijjar, 45, was shot and killed in June outside a Sikh cultural centre in Surrey,
"In the strongest possible terms, I continue to urge the government of India to cooperate with Canada to get to the bottom of this matter."
Ottawa on Monday announced the expulsion of a top Indian diplomat from Canada. To which, New Delhi responded on Tuesday by saying a senior Canadian diplomat had been asked to leave India within the next five days.
The Indian Foreign Ministry said that the expulsion reflected the government's "growing concern at the interference of Canadian diplomats in our internal matters and their involvement in anti-India activities", US media reports claimed.
India has been accusing Canada of supporting pro-Khalistan elements as they constituted a chunk of the voter base.
About 2 per cent of the Canadian population is Sikh, championing the movement to establish an independent Sikh nation they call Khalistan, derived from the word Khalsa, a holy word for them in their religion.
The state they want carved out lies in the northern Indian state of Punjab, where most of India's Sikhs live.
The Khalistan secessionist move is outlawed in India but has found a large number of supporters among the Sikh diaspora in countries such as Canada and the UK.
The Indian Foreign Ministry had earlier dismissed the Canadian allegations regarding Nijjar's killing as "absurd and motivated".
"Such unsubstantiated allegations seek to shift the focus from Khalistani terrorists and extremists, who have been provided shelter in Canada and continue to threaten India's sovereignty and territorial integrity," it said in a statement earlier Tuesday.